If you’re starting a business, you need to understand the difference between accounting and bookkeeping. Both are important in any business, but they serve different purposes. Here’s a quick overview of the two:
Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. This information is used in financial statements, which show a company’s financial position, performance, and cash flow.
Bookkeeping is the process of recording financial transactions in a company’s books of account. Transactions are recorded in chronological order and are used to produce financial statements.
The main difference between accounting and bookkeeping is that accounting information is used to make business decisions while bookkeeping information is used to produce financial statements.
Both accounting and bookkeeping are important in any business. Without accurate financial information, it would be difficult to make sound business decisions or to track a company’s financial performance.
Another difference between accounting and bookkeeping is that accounting involves interpretation, analysis, and decision-making, while bookkeeping is primarily concerned with record-keeping. Accounting provides information that helps business owners understand the financial state of their company, while bookkeeping is mainly used to ensure that financial records are accurate and up to date.
Here is a simple breakdown of some typical accountant and bookkeeper tasks.
- Advise CEO and Board on Strategic Planning
- Prepare financials to follow GAAP and define potential operational or financial improvements
- Work With Operations to guide them on decisions
- Complete budgets, projections, and financial dashboards
- Handle Banking, Shareholder, and Audit requirements
- Managing Accounting department
- Establish policies and procedures and internal controls
- Review investment decisions
- Preparing and filing tax returns
- Maintaining financial records
- Recording transactions
- Processing invoices
- Reconciling bank statements
- Preparing reports
- Process payroll
- Paying bills
What credentials does a bookkeeper need?
Licensing for bookkeepers is available but it’s not required. The American Institute of Professional Bookkeepers (AIPB) and the National Association of Certified Public Bookkeepers (NACPB) both offer credible licensing certifications.
The American Institute of Professional Bookkeepers (AIPB) is a professional organization that provides education and certification for bookkeepers. They offer a variety of resources and services, including online courses, exam preparation materials, and networking opportunities. Membership in AIPB is open to anyone who has an interest in bookkeeping.
The National Association of Certified Public Bookkeepers (NACPB) is a professional organization that provides education and certification for bookkeepers. They offer a variety of resources and services, including online courses, exam preparation materials, and networking opportunities. Membership in NACPB is open to anyone who has an interest in bookkeeping.
What credentials does an accountant need?
An accountant needs to have a degree in accounting or finance from an accredited university. They will also need to have a CPA and or an MBA. The CPA is a certification offered by the American Institute of Certified Public Accountants (AICPA). It is one of the most widely recognized accounting certifications in the world, and it is required for those who want to become licensed accountants. Licensed accountants are only required in tax preparation and performing audits. The CPA exam is challenging, and it covers a wide range of topics related to accounting. Each state has its own specific requirements to sit for the CPA Exam. A Master of Business Administration (MBA) is a graduate degree focusing on business administration. Within the MBA program, a student can specialize in a specific business area, for example, Accounting, Finance, Information Systems, etc.
Accounting is more complex than bookkeeping, and it requires a higher level of skill and knowledge. An accountant who has varied industry and company experiences will be able to initiate accounting best practices. However, there is some overlap between the two disciplines, and many bookkeepers also have accounting training. Ultimately, the main difference between accounting and bookkeeping comes down to the level of detail and analysis involved. Bookkeepers focus on keeping track of financial transactions, while accountants use this information to make informed business decisions.